THE bank's report said continuing to use the pound in an independent Scotland would be “more challenging than commonly assumed”.

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REUTERS

Barclays believe Scotland keeping the pound would be “more challenging than commonly assumed”.

AN independent Scotland is likely to set up its own currency in the outcome of a Yes vote, Barclays Bank analysts have warned.

The bank said continuing to use the pound – as Alex Salmond insists an independent Scotland would – would be “more challenging than commonly assumed”.

Salmond has branded his political opponents’ rejection of a formal currency union as a bluff designed to scare Scots into voting No.

But the Barclays analysis suggests it would not be in an independent Scotland’s interests to keep the pound even if a deal could be agreed.

While the bank noted such an arrangement would bring reduced set-up and transaction costs, their report said these benefits would be outweighed by the dangers caused by the difference in size of the Scottish and the rest of the UK’s economies.

The report said a sterling currency union would be particularly “susceptible to asymmetric shocks” – meaning the Scottish economy could suffer in the way areas of the Eurozone have in recent years.

On creating a new Scottish currency, the report states: "An independent currency would provide the maximum degree of flexibility for policy.

"If Scotland chooses independence and chooses an independent currency - regardless of regime - the most important question for currency markets will be how to value the new Scottish crossbill (Scottish currency) and (the pound)."

Secretary of State for Scotland Alistair Carmichael said the report highlighted the “difficulties” of independence.

“This report confirms that Scotland and the UK are both better off with Scotland staying part of the UK,” added the Lib Dem MP.

“Leaving the UK causes us all sorts of currency problems and those problems would be amplified by falling oil revenues.”

However, a Scottish Government spokeswoman dismissed the Barclays analysis.

She said: “The Scottish Government has put forward sensible proposals for a formal monetary union that would ensure both governments had full flexibility over their fiscal policies, within an overall sustainable framework.”